Factory of the Month: The only way is Essex

New Holland Agriculture in Basildon is on track to manufacture a record number of tractors this year, a record for the plant. Plant Manager Colin Larkin and Material Handling Manager Dean Stephenson explain how deeper application of the company-wide production system – World Class Manufacturing – has enabled this higher output while still reaching 8% year-on-year cost savings.

Two years after David Cameron and Nick Clegg’s awkward coalition-bonding honeymoon in Downing Street’s Rose Garden, they needed somewhere strong and export-focused to renew their marriage vows. Where else but New Holland Agriculture’s tractor factory in Basildon?! Surrounded by blue tractors – with a couple of yellow decals to keep the coalition

Baroness Verma visits the plant

message on page – the workers cross-examined them on several subjects. “They got stuck into them too,” says Dean Stephenson, Basildon’s material handling manager. And with the factory on track for record output, it was the kind of backdrop that gave a bit of backbone to a shaky alliance.

Rumour has it that No. 10 was even concerned that the factory was doing so well it would not accurately reflect the tricky spell UK manufacturing was going through.

The product

Basildon handles at least one product upgrade a year, which always involves a modification to the production. A platform team from Italy comes to oversee new production changes.

The most recent product upgrade:

Involves increased complexity to meet European and US Tier 4 emissions regulations.

Has an ABS (advanced breaking system) model that has better stopping capability.

There are new process systems to match it, and a new rolling road for testing.

The ABS involves another 300 part numbers. Adds to complexity and material flow issues in the plant. “For the last decade emissions have driven product changes,” says Larkin. “The last big mechanical change was the guiding arm rest in 2010.

The EPM team works with the shop floor to get concept parts integrated, building test units offline, offering feedback to the design teams. “With a new product, you see new losses to attack. You constantly find better solutions,” says Mr Stephenson.

New Holland Agriculture is shipping record numbers of tractors but, like the coalition government, is not without big challenges. How easy is it, for example, to find eight per cent operational savings year-on-year? Colin Larkin, timeserved plant manager at the 40-hectare site in Essex sucks his teeth. “We are able to get to 5-6 per cent fairly easily. The other 2-3 per cent is quite painful. We haven’t reached the ‘impossible’ point yet.”

It is a big ask, but entirely realistic in the world of high volume heavy equipment manufacture. New Holland Agriculture (henceforth referred to as Basildon or CNH UK) is part of the CNH Group that includes agricultural brands Case IH and Steyr, and CNH in turn is part of the Fiat Industrial group which includes truck maker Iveco and the industrial and marine division of Fiat Powertrain Technologies. The division faces internal competition from Case and externally from companies like Caterpillar and John Deere in a global tractor market worth several billion pounds a year.

David Cameron visits the plant

“We have just been awarded the WCM Bronze Award (October 24). But for a Gold award, we don’t even understand what that means yet,” Dean Stephenson, Material Handling Manager

The devotion to lean manufacturing at all these companies is intense, so to keep on top CNH UK must drill into its operational efficiency in greater detail than ever before.

The news in October that main shareholder Fiat Industrial Group’s offer to merge with CNH had been rejected puts perhaps even more pressure on factories like Basildon. While on some measures, such as the number of Best Practice awards won, Basildon tops the group’s league table, a merged, larger company in a tough economy is always looking to consolidate costs. After brisk sales in the first three quarters, a slower sales forecast in the last quarter of 2012 adds to the pressure on the manufacturing team.

How WCM works: Focused Improvement

Q&A with Dean Stephenson

While Improving safety is a top priority, the raison d’etre for WCM, Mr Stephenson says, is to identify and attack losses. “The true benefit of WCM is in the level of detail we can explore in losses, across departments,” he says. “But sometimes that next level of waste isn’t exposed until that (certain) improvement has taken place.”

Stephenson says WCM works because some first stage improvements reveal knock-on waste reduction benefits. Several months ago they ran a pilot area for kitting parts. “There was initial skepticism. We did it with Colin over time and proved that it reduced waste. We took same idea into a second area and quickly recognized further, different improvements. This now makes the first implementation look second rate, you implement, then do it slightly better in the next area.”

“A 20 per cent reduction in non-value added activity in a virgin area was, in the early days, a very difficult task. Today that’s peanuts – we’re regularly getting 25 per cent to 30 per cent,” adds Stephenson.

Where are the improvements happening?

Operator ergonomics lead to line shortening: CNH is trying to cut down operator walking, time spent waiting for material, the time spent by an operator preparing a part before he fits it to the tractor.

In WCM’s early days, Basildon used spaghetti charts and value stream mapping, for quick wins like moving boxes closer to an operator etc. “Now the philosophy is to deliver the correct part right there – as close as is reasonably possible to the operator’s hand,” Stephenson says.

“With some of the kitting and internal logistics we’ve developed, we’re able to add the value to the product much faster. Because we can add the value much quicker, we’ve recognised that the line doesn’t need to be as long. We’re making a potential saving in WIP by having shorter production lines and shorter lead times.”

“Where we could not see those wastes in early days, through doggedly attacking wastes we’re exposing further wastes. That’s why we’ve been able to achieve eight per cent [cost saving] targets.”

Attacking losses – World Class Manufacturing overview

To seek and destroy losses, CNH uses World Class Manufacturing, a production system based on 10-pillars devised in the 1990s and adopted by a group of seven global companies. Some, like Saint-Gobain, have departed WCM while others, such as Royal Mail, have joined.

World Class Manufacturing is a structured system uniting some of the most effective known methodologies in manufacturing best practice. These include Total Quality Control, Total Productive Maintenance, Total Industrial Engineering, Just in Time, etc, which are geared towards raising the entire logistics and manufacturing cycle of plants to levels of excellence. Fiat Industrial has some 54 plants worldwide using the WCM system, covering plants at CNH, its Iveco truck factories and the FPT Industrial subsidiary.

The WCM structure, that resembles other lean manufacturing “temple” structures, has pillars for:

Safety Cost deployment

Focused improvement

Autonomous maintenance and Workplace organisation

Professional maintenance

Quality control

Logistics / Customer service

Equipment management / Early product management

People development

Environment

Fiat adopted WCM in 2006 and CNH Group in 2008. Four or five years on from the first signs of WCM, Colin Larkin says it has been a major achievement for CNH. “It shows the vision of Mr Marchionne [Sergio Marchionne, Fiat’s CEO], for implementing this model and how it has evolved. He could see it in other companies like Toyota and BMW, and wanted to bring that into our production systems.”

“A 20 per cent reduction in non-value added activity in a virgin area was, in the early days, a very difficult task. Today that’s almost peanuts – we’re regularly getting 25% to 30%,” Dean Stephenson, Material Handling Manager

When The Manufacturer first visited CNH UK in February 2011, WCM was about 20% implemented. Mr Larkin, who talks like a man with 100% conviction in the methods used in his company, says WCM is now 50% implemented with still a long way to go.

“The beauty of the WCM system is it is a common language and a common platform from which to be measured against your peers,” says Dean Stephenson. “The best practices derived through implementation can be shared throughout the entire Fiat Industrial group.”

Basildon is audited twice a year by an auditor from within the group, this generates a live score that is a standard shared by the whole company. There are specific strengths and weaknesses within plants.

An air cleaner frame

“The philosophy is to learn from the best,” says Mr Stephenson. “Cross fertilization is encouraged. If there is a plant in Italy doing well on process point analysis or DOE, for example, then Basildon would visit that plant, and vice versa. “We’ve sent staff to logistics workshops, and out to a plant in New Delhi to bring them up on workplace organisation.

Now WCM is implemented in Chrysler, which Fiat acquired in 2009. “We are sharing information with Chrysler and plant visits there are quite likely,” Mr Larkin adds. Of the 25 factories in the CNH group, eight are at a similar level to Basildon, with audit scores from 46-48 points.

How well is WCM embedded across the vast 40-hectare site? “We have an implementation plan,” says Mr Larkin. “There are parts of the plant where it is well-embedded, other parts where it has yet to be implemented. Until we get that as standard right across the plant, we’ve got huge opportunities still.”

WCM has driven many improvements at Basildon. Some of the pillars may have profound consequences for CNH UK – and for the group. Basildon is working on EPM – Early Product Management – processes that may help Group to redesign components to save material and packaging costs, and reduce assembly time.

Professional Maintenance (PM)

One pillar where measurable savings have been realized is Professional Maintenance, or PM.

Dean Stephenson and pillar leader Stephen Tween are responsible for PM and have been assessing the losses incurred by mechanical breakdowns.

Basildon recorded many losses from AVG (automated guided vehicle), a type of AA class machine, where PM activities are now prioritised.

The plant introduced a detailed machine ledger, for each device, that drills into the detail of the components.

The ledger shows, for example: Machine AVG03, the day, time, interface board, ID code, where the spare part is located, the supplier for that part, and a maintenance SMP number.

“For the AVG, using the machine ledger we can identify maintenance periods for individual components down to ‘O’ rings,” says Stephenson. “When we have a failure on a machine, we analyse the breakdown and identify the failed component. We can look at the maintenance cycle of that component or we do a root cause analysis of why it failed. This can a) improve the life of the component and b) if necessary increase the frequency of the maintenance cycle. It shows which component has broken, at what time and what we’ve done to fix it.”

The system allows you to build a full maintenance schedule for individual components & identify where the breakdown has come from.

The machine ledger was copied from CNH in Antwerp – Basildon had its own but Antwerp’s was slightly better, an example of trans-site learning. The ledgers are on the shop floor next to where the machines are working, and is repeated throughout the factory.

“As a result of this we’ve been able to achieve zero breakdowns on our AA class machines due to lack of maintenance. Any breakdowns that occur will now be due to an outside factor.”

“Where we could not see those wastes in early days, through doggedly attacking wastes we’re exposing further wastes. That’s why we’ve been able to achieve eight per cent [cost saving] targets,” Dean Stephenson, Material Handling Manager

Early Equipment Management – EEM Early Product Management – EEM and EPM are encouraging Basildon to look at the overall layout of the factory and evaluate how both the plant and the vehicle itself could be redesigned. Could they use less nuts and bolts in this vehicle by examining the design architecture of the vehicle from the perspective of the shop floor?

Colin Larkin has spoken to the chief engineer of one of the products about the merits of EPM. “He is finally agreeing with me that we can go to the highest level of commonality and take a lot of the complexity [of the vehicle] away in the next two to three iterations of the product.”

Basildon recently stripped down a competitor’s product side-by-side with one of their own, involving shop floor operators, not design engineers. “We’re getting bottom up ideas which are probably outweighing some of the ideas we’re getting from our design engineers,” says Stephenson.

“We’ve done reverse engineering before with design engineers, but it’s the first time we’ve used shop floor guys with a competitor’s product.” Larkin adds that a design engineer might physically assemble and reassemble a product a few times, while a shop floor operative does this 127 times a day.

“It is easy for the manufacturing guys to say a design is suboptimal, but you have to then offer an improvement. We are not criticising the design per se, but we are trying to evaluate the waste that the design is causing – the cost that has gone into the product as a result of that design.”

Designing a bolt that is 20mm shorter can use less packaging, improve logistics, perhaps use less labour and perhaps other benefits. The engineers are starting to sit up and listen to the shop floor. “WCM is certainly promoting more links between the shop floor, the design team and head office,” says Colin Larkin.

People and culture change

Basildon has done a lot of BIT – NVQ Business Improvement Training – with the help of sector skills council Semta and delivered by Pera, a leading provider of vocational training in the UK.

“There are parts where WCM has yet to be implemented. Until we get that as standard right across the plant, we know we’ve still got huge opportunities,” Colin Larkin, Plant Manager

At first the benefits to anyone were unclear, says Mr Larkin. “As we’ve rolled the standards around the plant you can see that people have bought into it much easier because they understand from the trainer what we’re trying to achieve.”

As with any root and branch lean manufacturing programme, true results only prosper when there is buy-in from all employees. This is happening, the senior management says. Basildon has developed its own people development methodology. Green belt and black belt lean six sigma is provided to those who want the professional development, and each of the 10 pillars has a pillar leader. “We report to people on the savings they implement compared with their salary, and there is a bonus scheme linked to savings realised,” says Larkin. “We want people to be motivated by the job but this incentive provides real clarity on the relevance of WCM.”

But management has little tolerance for flimsy projects. “Every project has to start with a justification based on the cost savings it will achieve,” says Stephenson. “Why? I’m not interested in hearing it unless there is one.”

Apprenticeships

Basildon went 19-years without an apprenticeship scheme. In 2011, it took on eight apprentices and another four in 2012.

Between Semta, Essex County Council and Prospects College, a training provider based in South Essex who delivers the scheme, the apprentices are 50% funded.

“We have deep knowledge of how to work on a piece of equipment, but conveying that in formal training is a different skill, which we’re trying to learn.” The gap that these three have revealed needs to be resolved in the next year, says Larkin.

One of the main benefits of apprentices is succession planning. “Every year, the number of candidates for management roles gets thinner,” says Larkin. “Manufacturing has not been a viable employment choice for years, so there is not the pipeline of talent,” adds Stephenson. The apprentices is one route, while interns is another. CNH UK has looked at supporting the academy school model in Essex. It comes back to WCM: “What is the benefit and cost? Right now the benefit is not clear to us.”

Group behaviour – Sharing best practice

The plants at CNH are engaged in healthy competition on a range of KPIs. At the end of December 2011, 54 Fiat Industrial group plants were involved in the WCM programme – 30 CNH, six FPT Industrial and 18 Iveco plants. Of these plants, eight sites – two CNH, two FPT Industrial and four Iveco – gained the Bronze level and two sites (Bourbon Lancy of FPT Industrial and Valladolid of Iveco) achieved the Silver level. Basildon was having an audit for the WCM Bronze award in late October.

With such competition, why would you share your best practice tips?

“We’re encouraged to share, and we’re quite happy to share our good ideas and vice versa,” says Larkin. “If we believe it to be a better practice than the incumbent, we can upload it to a European server. Central group will evaluate and verify it as a best practice – others then feel free to copy it. There is a portfolio of deemed best practices within the group.”

Basildon’s Customer Centre and New Display Area

By May 2011, CNH UK realised that its customers were recognising the improvements in the plant. A purposebuilt Customer Centre, paid for by the CNH group, was commissioned. Everyone on the shop floor was involved. “We showed to the staff the visitor presentation, and explained that the customers would see them on the lines and they had seen the same presentation, so they could apply the video message to their jobs, says Larkin. “Also it recapped a lot of the improvements we’d made in last two years, which can be easy to forget.”

“Linking the workers to visitors really bought everyone into the new customer centre, explaining to them we would be bringing 7,000 visitors a year through the plant,” says Stephenson. The visitors split is 80% farmers and dealers, 20% schools, suppliers and others.

“We are pushing material up the line by delivering it in kits. The fewer processes on the production line in total the better,” Colin Larkin, Plant Manager

Corporate Social Responsibility

The Basildon plant helps sponsor employees’ children’s football and rugby teams, and boxing clubs. Some of the employees are encouraged to run these competitions. There is an internal 5-a-side and 6-a-side football competition.

Some of the management are members of a local golf society and play at different venues around the county. There is a fishing club that runs fishing competitions. “We’re sponsoring bits of these all the time, year round,” says Larkin.

The plant organises a family visit every 12-24 months. Recently a local church asked if they could visit the plant the same day as a production Saturday was scheduled. Basildon hosted did the tour and provided all the hospitality. “Now we’re planning the next time there is a production Saturday to allow employees to bring their families to visit.”

Is Saturday work popular? “It’s voluntary and pay is time-and-a-half. But management gets no extra, we make the sacrifice for the love of the job,” Stephenson adds with a smile.

Conclusion – What can CNH UK teach others?

Manufacturing at New Holland Agriculture comes down to the constant, disciplined attacking of losses. Management constantly have internal meetings with, for example, quality or engineering who are told to make sure the focus of their exercise is to attack losses.

“I go to many council meetings, the first thing I always say is: “Do you understand what your losses are? Do you know where you are spending but also wasting your money?” says Colin Larkin. “You need to pick projects based on the biggest losses. Do you have a CI policy? Can you show a pareto of those losses? Often, they can’t.”

Where does Basildon go for best practice? Colin and other managers have visited the Olympic Park to study how they’ve made the people and material flow, “which has been done very well”. Today, factory visits are common but it is rare they discover a game-changing idea. “Five years ago we had consultants in because the [then] plant manager wanted to implement standardized work,” Stephenson says. “Today we find ourselves being more mentors and coaches to those within and outside the group. We are pretty good at what we’re doing.”

From 2002 to 2005 the long term future of Basildon was uncertain due to quality and delivery issues. “But as we have adapted and become more flexible and much leaner, the threat appears to be far less, and allowing for some substantial investments it suggests we have a long term future,” says Larkin.